Futures Point To A Lower Open

INTEREST RATES

01/09 OVERNIGHT CHANGE to 04:09 AM:BONDS-2 The
Treasury market could be in for a watershed session today. While we doubt that
the jobless recovery issue is going to go away today, it is possible that the
market could begin to sense that the jobless threat is mitigating. Under the
assumption that the economy will continue to grow, one has to be interested in a
position short.

STOCK INDICES

01/09 OVRNIGHT CHG to 04:09 AM:S&P-70, DOW-10,
NIKKEI +127, FTSE-11 While the stock market seems to be capable of discounting
disappointing numbers from the US payroll report, we have to think that the
market will not be able to avoid a slight setback in the wake of numbers that
come out below expectations. It would seem greedy to be disappointed at a
100,000 gain in non-farm payrolls but that might be the initial response in the
market. However, we have to think that a “slightly disappointing” reading will
be digested within the session and the bull trend will return late in the day or
early next week.

DOW

The trend in the Dow looks to be fixed and strong coming into the report this
morning. One would expect the Dow to hold up better than the S&P if the numbers
are disappointing and we would still expect the Dow to manage a new high during
the session if the numbers are in the upper end of the range. Trend line support
in the Dow comes in at 10,470 today but a minor chart failure would take place
with a trade below 10,484! The trend is up and the numbers are expected to be
good.

S&P

The S&P certainly has much greater volatility potential today than the Dow. In
other words, a slightly disappointing reading could cause the S&P to pull back
to 1116.60 despite seeing trend line support come in at 1120.45. We would stay
long but might consider selling a Jan S&P 1140 call and buying a Jan 1120 put
for a minimal amount of premium to protect the position.

FOREIGN EXCHANGE

US DOLLAR

There are so many cross currents operating that the
real trend might not be able to show itself today. Not only is the BOJ
intervening at a breakneck pace, but also it would seem like the Dollar is
prevented from getting a benefit off an improving economy. In fact, unless the
US non-farm payroll gains 150,000 jobs (which is massively above anything the
Euro zone could hope for) the Dollar will be viewed negatively. On the other
hand, Euro officials yesterday suggested that overall strong demand growth is
offsetting the potential negative impact from the rising Euro and that seems to
give approval to more Dollar losses. However, we have to note that the Dollar
fell sharply off its highs Thursday but it did not and has not managed a fresh
low and therefore a consolidation pattern exists. One can hardly attach
fundamental analysis to the direction of the Dollar today but one can play for
volatility! The trend is down but today is a junction that could “potentially”
change the trend. We think the Fed has to make comments to turn the Dollar and
that the markets assumptions on future Fed action, will only have a fleeting
impact on the Dollar today. Those short the Dollar and long a series of June
calls, have to make the futures pay for the calls before lifting the futures,
because the trend is still down!

EURO

As mentioned already, the ECB seemed to discount
concerns of the rising Euro by suggesting that a strong economy will allow a
higher Euro to be tolerated. Therefore, there is no significant intervention
expected. However, we could see the Euro weakening slightly on a big US number.
In the end, the trend is up and a slightly weak US number should launch the Euro
back toward the highs.

YEN

We suspect that the BOJ has thrown the kitchen sink
at the market today and throughout this week! The net result is that the BOJ has
its finger in the dike but the fundamental tilt is still providing an upward
pressure in the Yen. In order to see that upward pressure abate, the US will
have to show ultra strong numbers. Those that sold the Yen and bought three
calls should be able to liquidate the futures and cover most of the long call
premium on the opening.

SWISS

The Swiss remains poised for new highs today or
Monday, unless there is a shift in the entire composition of the marketplace. We
would now treat any trade below 81.00 as a major failure to the bull trend.

BRITISH POUND

The Pound continues higher in a trend that has the
most definition of any currency. Therefore, the Pound might be able to avoid
temporary corrections but it might also suffer the biggest backlash, if
something major changes. Assume the trend is up unless the US numbers cause wild
euphoria toward the US economy.

CANADIAN DOLLAR

The Canadian is poised for new contract highs. Stay
long, but buy a February 77.50 put just to increase staying power in the
futures.

METALS

OVERNIGHT

GLD-0.40, SLV+1.20, PLAT+1.00 London A.M.
Gold fix $422.80 +$4.70 LME COPPER STOCKS 417,000 tons -4,900 tons COMEX Gold
stocks 3.12 ml Unchanged Comex Silver stocks 123.6 ml oz -5,099 oz

GOLD

While Asian prices were weaker overnight, the London
fix was moderately higher than the prior fix. While the US Dollar fell sharply
from its highs Thursday, the currency did not make a new low and with the
slightly higher Dollar action this morning, there is still some concern that the
Dollar is attempting to bottom. There would not seem to be a fundamental reason
for the Dollar to bottom unless the US payroll report is so strong that US
interest rates are expected to rise and money begins to flow toward the US.

SILVER

The silver market is not showing the same ebb and
flow being seen in the gold market, which might be a positive for the bull camp.
However, the silver market is still sitting on a precarious chart formation and
a slide below $620.5 might undermine the market and cause a wholesale stop
loss-selling binge. We suspect that the COT report to be released after the
close today will show the largest net spec long ever and that might be cause for
some selling Monday.

PLATINUM

The platinum market sits right at fresh contract
highs this morning, as the market continues to trade on its own fundamentals. In
other words, platinum is disconnected from the daily action in gold and silver.
If US payroll readings denote positive progression in the US economy, then
platinum will be lifted into new highs.

COPPER

Overnight prices were mostly unchanged despite news
that workers voted for a strike mandate in the labor negotiations in Canada. In
other words, the big rally yesterday mostly factored the strike potential, but
it is important to realize that talks are ongoing and that a settlement isn’t
impossible. In the end, supply and demand fundamentals were conducive to gains
and the strike threat just ignited existing spec buying.

CRUDE COMPLEX

Even when it looks like prices are going to
weaken, the buyers manage to step up and push prices back up. Overnight it would
seem like the bull camp is flexing its muscle, as European crude prices have
apparently climbed above the pre war price levels on expectations that the
current cold will pull down inventories and could create a critical shortage in
the months ahead. Even after disappointing product inventory readings and a less
than stellar draw in natural gas stocks early in the week the market manages to
show strength.

NATURAL GAS

Even after the weekly inventory report came in meek,
with a 52 bcf draw, natural gas prices managed to find enough long interest to
propel prices right back to the recent highs. It would seem that the mixed
forecast is cold enough to drive prices up, especially when one considers the
soaring economic optimism present in the market place. It would also seem like
the commercial natural gas trade is simply unwilling to go uncovered and with
the funds recently net short, we suspect that the market has plenty of buying
capacity in reserve.